All in the Family

Business gets personal

George Bailey, played by Jimmy Stewart, shakes Uncle Billy, played by Thomas Mitchell, when he loses the bank’s money in "It’s a Wonderful Life."

Don't Let Business Issues Become Personal

 

 

 

Owners of family businesses face unique challenges. However, steps can be taken to keep your family business from destroying la familia.

For example, I have a client who had the necessary training and licenses to start a business. When serving clients and managing the company became too much work for Andres, he turned to his brother, Beto, to help with the latter. With Beto's business experience, they appeared to make a perfect team.

Andres gave Beto free reign, and access to everything. Beto could sign checks, open bank accounts, sign contracts, hire and fire staff. All was well until the company ran out of money.

Andres soon realized that bills were not being paid and that the company’s line of credit had been maxed out. He also discovered customer accounts had gone uncollected, and employees had been hired without contracts.

Things went downhill fast. Pretty soon, the whole family was involved in what became an ugly mess. Andres and Beto stopped talking to each other.

The business survived, and in time, I’m sure the family will, too. It’s a shame, though, especially since the whole mess could have been avoided.

In a startup business, things move quickly. A great deal of work must be done in very little time. So it's easy to skip the details that matter only when something goes wrong. And when something does go wrong, as Andres and Beto discovered, it can be 10 times worse in a family business.

The following five tips can help you avoid such issues in a family business:

1. Develop a succession plan, and write it down. The underlying idea is that a business owner will eventually transfer ownership, either by selling the business or training the next generation to take it over. If you intend to pass ownership of the company to your son, for example, formalize the plan by committing it to paper.  Writing things down has benefits. If you write and sign a document, you are more likely to stick to it. Each family member is likely to be more committed and accountable.

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About the author

Armando G. Roman

Armando G. Roman CPA/PFS MBA has more than 25 years of experience providing clients with advice and counsel regarding financial matters and their monies.  Mr. Roman speaks fluent Spanish and is a former columnist for La Opinion, the nation’s largest Spanish-language daily newspaper.  He is the incoming chairman of the board of directors of the Arizona Society of Certified Public Accountants, chairman of the Audit Committee of Maricopa Integrated Health Systems, and a board director of the Arizona Hispanic Chamber of Commerce.  He lives in Paradise Valley, Arizona, with his wife and three children.  He can be reached at a.roman@romancpa.com